What are the exact numbers?

What are the exact numbers?

Hi Gareth, I like the sound of this but I'm still not clear on exactly how this works. What percentage of your house equity will we be paying? Say I have a family home worth $1million and a household income off $100K. What amount would we pay each year? I can't see any specifics in your FAQs or policy documents.

Official response from completed

add up the value of all your assets, take off your debt. That’s your equity. Of course the government might say don’t include anything worth less than $10,000, or $20,000 - who knows?

 

Now you need to guess an effective tax rate that will be charged every year. I’d guess anywhere between 0.5% and 1.5%. But remember that will be ultimately. Who knows how many years a government would choose to phase in this change in the tax base? They don’t want to collapse house prices, the aim is to take the sting out of house price inflation. And who knows whether they grant an exemption - that could be anything from no exemptions (like GST) to a minimum value of say $200,000 - or even the value of an average house. These are all choices for the government to make.

Thirdly you need to estimate what happens to your tax rates - remember all revenue raised is returned through tax cuts. Also remember the more exemptions they  grant, the less tax is collected, the smaller any cuts must be. And of course a government might decide to spend all the proceeds cutting the top tax rate, another government might decide to cut the bottom rate only, a third government might just cut all rates equally.

 

Hopefully by now you can see that how it effects you in particular is impossible to know unless all these factors are known. These are political choices. If they do it properly as I would - and remember we have no aspiration to be the actual government - then they’d collect enough to cut tax rates by a third. So it is a fundamental change in the way tax is collected - wage earners at long last get the tax relief that is only fair, and asset owners are flushed out from the bushes. But hey, that’s your choice.

 

I always ask people whether they think this enormous rise in inequality that has occurred since Ruth Richardson did her thing is in any way fair? If they don’t care we don’t need to talk on this any further. But if they think its unfair then I’m suggesting what the best (in terms of both economics and fairness) way to address is as I’ve outlined. Do it with no exceptions, cut income tax rates by 1/3rd and 80% of people will be better off. It’s a no brainer. The only issue is how many of the 20% (or those who aspire to be) care enough to support it. Your call.

 

I have to say it does amuse me to see people saying they’ll only support making NZ fair again if they are directly better off themselves. Makes them sort of prostitutes doesn’t it?

 

Showing 13 reactions

How would you tag this suggestion?

Sign in with

Or sign in with email

    Please check your e-mail for a link to activate your account.
    • Rachel Wallis
      commented 2016-12-12 11:25:38 +1300
      Gareth, I’d like to say one other thing. I think you need to be very careful intimating that people who ask questions about the tax realities of this policy are prostitutes. Most people are here because they have followed your foundation for years and agree with your social policies. I did a Masters level assignment on inequality in NZ and have always voted for parties who preference positive social change and look after those left behind. I, like others, gave you a rounded amount as a case study to make it easy for you to give an example of how your policy works. For you to derive from this that I’m somehow purely self-interested, and easily bought is incorrect and antagonistic.
    • Rachel Wallis
      commented 2016-12-12 10:59:52 +1300
      Thanks Gareth. I’m not personally in the top 20% but my preference is to leave the primary home alone and tax the second, third, tenth home etc.
    • Gareth Morgan
      responded with completed 2016-12-12 10:38:08 +1300
    • Oliver Krollmann
      commented 2016-12-10 18:51:54 +1300
      Kate, if you’re interested, have a look at my response to another question (with three example families). I did some math of my own there, which might be completely wrong … but if it wasn’t, all might not be as bad as it sounds.
      http://www.top.org.nz/75793/can_you_please_outline_a_scenario_example_showing_how_this_would_work
    • Kate Tyson
      commented 2016-12-10 18:15:12 +1300
      Hi Oliver. I was being totally sincere! Really, thank you for the answer you gave, it helps me understand a bit more, and it was kind of you to take the time to respond. And I really don’t know anything about tax :)
    • Oliver Krollmann
      commented 2016-12-10 15:53:50 +1300
      My apologies, Kate, I didn’t mean it that way. I’m not an accountant or tax expert, and my math might be totally wrong … but that’s how I understand it in principle.
    • Tristan Kiddie
      tagged this with i have the same question 2016-12-10 14:54:59 +1300
    • Kate Tyson
      commented 2016-12-10 12:28:10 +1300
      Hey Oliver. Thanks so much for that, I think it’s fairly obvious that I know nothing about tax. (It just comes out of my pay). That helps heaps.
    • Oliver Krollmann
      commented 2016-12-10 10:31:20 +1300
      Kate, I think that it might be more in the $3,000 to $3,500 range, based on an income tax rate of 17.5% and assuming your home is mortgage-free (otherwise it would be less because only your equity is taxed). You have to apply your personal income tax rate to calculate the tax (e.g. 17.5%, 30% etc.), not the estimated annual return rate of 5%.
      $400,000 × 5% x 17.5% = $3,500
      You get a similar result if you base it on rental value.
      $350 p/w x 52 × 17.5% = $3,185
      So either approach might be viable for calculation purposes of this new tax – although one of the FAQs already states clearly that the tax would be based on equity. 5% annual return rate sounds a bit much to me, too – if it was aligned with the government bonds return rate it’d be much lower.
      Please note that this is just my guess at this point because so far no tax calculation method has been published. I’m not a member of TOP or involved in TOP 1 in any way.
    • Kate Tyson
      commented 2016-12-10 08:55:53 +1300
      Could you just clarify whether the tax would be a percentage of the value of the house/asset or a percentage of the potential rental value? For example, if I use 5% for the sake of argument, if my house is worth $400k and the market rent value is, say, $350p/w, would I be taxed $20000 each year or $910 each year?
    • Kate Tyson
      tagged this with i have the same question 2016-12-10 08:55:53 +1300
    • Oliver Krollmann
      followed this page 2016-12-09 20:22:51 +1300
    • Rachel Wallis
      published this page in Ask a question about policy #1 2016-12-09 17:39:57 +1300